Early retirees from Russia versus early retirees from the USA. What are the differences?

I live in Russia and currently do not work. I only receive income from my own capital. I can see that our approaches and conditions are very different from those of like-minded Americans, so I would like to share my experience.

No one uses the 4% rule.

We got early retirees using a completely different strategy. Almost no one applies the 4% rule. Many rentiers live off dividends, rents and coupons only, the rate amount of which have been quite high in our country in recent years — more than 8%.

We use the index investment less.

Local funds’ costs are too high. Access to many interesting ETFs is closed to a typical unqualified investor. Although there are certain people who have no problem bypassing these restrictions.

Incomparable risks

Our region is part of the Emerging Markets group. There are many more risks here: constant ruble devaluation, inflation, etc. But these are the exact risks that allow us to get more profits.

We insure against risks in several ways. Some people use country diversification. Others simply believe in the best outcome. Additionally, there are people who use our system’s weaknesses for their own benefits.

Our costs are several times less.

And we are not talking about products in supermarkets in this case. We are talking about expenses that Americans spend crazy money on — education, medicine, and housing.

We got lucky. We still have some consequences left over from socialism that benefit us. That is why education and medicine are many times cheaper in Russia.

As a result, we need much less capital to retire early. We do not have student loans worth $100,000. We do not need to spend $350,000 on a house. Nor do we need to pay an annual salary worth for certain operations.

Our pension system has collapsed.

On Reddit, I can see that you are constantly discussing your retirement plans — we got nothing to discuss whatsoever. 🤷♂️ We understand that the state will not pay us; and even if it will, it result in insignificant amounts.

We have inherited real estate from the USSR.

Almost every third person in the country inherited an apartment from the USSR. It was given to us for free. Sounds crazy, right?

So as a result, there are several million potential retirees in Russia.🤣 Many people sell their expensive apartments, move somewhere else and buy slightly cheaper apartments. Excess capital that was made from such deals is usually invested. Or, as a different option, people just rent out an apartment that was inherited from their grandparents.

Low taxes for investors

Taxes for investors in Russia are simply ridiculous. A 13% flat rate is applied. But the others are not so lucky. Hired employees and businessmen are fully taxed.

State capitalism in Russia

This is both an advantage and a disadvantage. The state is the founder of many large corporations. And it takes away money for its own needs (pensions, social programs, etc.) from these corporations. It does so with the help of taxes and dividends. Private investors fully understand this concept, so they simply join the “whale” with the mentality that if the state needs dividends, then everyone on board will get them.

P.S. Please keep in mind — I am only talking about the experience of early retirees with a large capital. In the eyes of ordinary people, speculators, traders and small investors, the overall situation may turn out differently.

Please share your thoughts — what is unique about your own country? It would be interesting to hear the opinion of people living in Europe, Asia, South America and Africa.

I am Babaykin, a Russian 37y.o. retiree. My capital exceeds $1m. I wrote the book “Retire at 35”. I’ll translate and post articles in my blog.